Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Global Trends Favor Microsoft Corporation (MSFT)’s New Surface Pro

Microsoft announced quarterly revenue of $21.46 billion for the quarter ended December 31, 2012. Operating income, net income, and diluted earnings per share for the quarter were $7.77 billion, $6.38 billion, and $0.76 per share, During the earnings conference call, Chief Financial Officer Peter Klein repeated a number of times that Surface contributed to revenue.

“Certainly this quarter [Surface] was a contributing factor to revenue growth in the Windows business,” Klein said. During the call, Microsoft cited Surface as a part of non-OEM revenue that grew 40%.

Microsoft Surface

Microsoft’s first Surface was released in October, and it is driven by a form of Windows 8 called RT, which is contained in competing tablets and smartphones. The new Surface Pro will be released to enable customers have the opportunity of choosing the type of their choice. Through such an option, they can personalize their experience and gain greater enjoyment from the tablet. Microsoft officials stated Surface RT will soon be shipped to Austria, Belgium, Denmark, Finland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden and Switzerland.

“We are thrilled to expand the Surface family with the release of Surface Pro,” said Panos Panay, corporate vice president, Microsoft Surface. “The launch of Surface Pro marks a pivotal moment for customers who can now do more with their machines than ever before. Within the Surface family, customers will be able to choose a combination of devices that best suit their needs: Surface Pro, which provides the power and performance of a laptop in a tablet package, or Surface RT, which offers the convenience of a tablet with some laptop capabilities so you can get things done.”

It is noticeable that the Surface Pro tablets are among Microsoft’s first products shipped to the market in the New Year. The Surface line of products is proving popular with time, and gaining a head start early in the year over its rivals is good for Microsoft. When we relate Microsoft’s tablet sales to its recent financial statement, it is clear Microsoft has been improved in comparison to its 2013 first quarter report, so it can be said that the company is operating at an efficient level.

Fundamentals & Competitor Analysis

Microsoft currently has a P/E ratio of 15.41. This compares to Apple Inc. (NASDAQ:AAPL) at 10.58, Google Inc (NASDAQ:GOOG) at 24.26, Dell Inc. (NASDAQ:DELL) at 9.33, Oracle Corporation (NASDAQ:ORCL) at 16.41, Samsung (SSNLF) at 8.68 and industry average at 11.70. Microsoft has a huge opportunity here. The Surface Pro was recently released, and the $999 128GB model sold out instantly. On the day of the release, Microsoft shares jumped 1.13%, and the stock traded well above its daily average of 50.3 million shares. Microsoft is set to rise on strong sales of the Surface Pro.

With gross margin of 73.47%, compared 38.63% for Apple, 60.06% for Google, and 20.93% for Dell, and price-to-sales ratio of 3.20, compared with 5.14 for Google and 4.45 for Oracle, and price-to-earnings ratio of 15.31, compared with 24.29 for Google and 16.44 for Oracle, Microsoft does seem to be ahead of its peers. Samsung has just released its ATIV PC PRO, but it lacks an e-mail client. Apple’s iPad 3 is in direct competition with Surface Pro, but it lacks microSD slot for storage expansion. Dell has just launched its latitude tablet, but Surface Pro can give it a run for its money. With the Surface Pro release, Microsoft will compete more effectively with its rivals. And it must be noted, Microsoft is supposedly the biggest in the niche it is operating in.


Looking at its sales of the Surface, initial sales of the Surface Pro, and the prospect of rising sales of tablets worldwide, Microsoft appears to be a solid investment at the moment.

The article Global Trends Favor New Surface Pro originally appeared on and is written by Maxwell Fisher.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.